KBC (AO) | Buy | Q1 results: Stronger NII in Q1 and positive consensus NII revision likely

Research evidence excerpt

KBC (AO) | Buy | Q1 results: Stronger NII in Q1 and positive consensus NII revision likely

deposits in Q1 (EUR+2.4bn), which we

understand was mainly related to corporate business, but we would also expect management to remain cautious on deposit mix

and pass-through rate assumptions in the rest of the year.

Net net, we think consensus will increase NII estimates for FY-2026 by cEUR50-75m to cEUR6.9bn post Q1, which could lead to an

increase of pre-provision profit estimates. We would expect a limited positive consensus EPS upgrade post Q1 as the NII upgrade

will likely be offset by slightly higher loan loss estimates (related to the management overlay). We would expect the stock to

outperform by c1% today, given the stronger-than-expected NII in Q1.

In details

Q1 includes several one-offs: 1) EUR23m (in line with guidance), 2) -2m integration costs in Slovakia, 3) EUR-10m loan interest

subsidy correction, 3) EUR+31m legal case provision release.

NII came in 1.5% better than expected despite the negative impact of the number of days (EUR-17m QOQ) and inflation-linked

bonds (EUR-17m QOQ) that is set to reverse in Q2.

Loan and deposit growth came in at a strong +2% QOQ with loan growth at +7% YOY and deposit growth at +5%.

F&C in line. The mutual fund business posted EUR1.6bn net inflows in line with our estimates.

Insurance results came in stronger than expected. All insurance lines at EUR172m, versus consensus at EUR155m, thanks to

strong COR in Q1 (84%). We see a positive read-across on Ageas.

Dealing room income weaker at EUR30m in Q1.

Excluding FX and one-off profit bonus, opex excl. bank tax was up 3.7% YOY, which is higher than the +3.4% guidance. KBC said

that the opex miss was due to timing differences and that the organic guidance of +3.4% YOY remains valid.